Employee Benefit Flashcards
The logic behind Ind AS 19
Financial statements are prepared on the accrual basis of accounting which records events when they occur not when cash is transacted. Employees provide services to the company throughout the year. Hence they need to be recorded as and when provided.
To which employee benefit it apply
formal plans or agreements
as required by law or any industry arrangement
by informal practices that give rise to a constructive obligation
To whom is it paid?
Employees their dependents/beneficiaries others such as insurance companies
Employees include
Full-time Part-time Permanent Casual Temporary Directors and other management personnel
Post-employee benefit plans and their types
formal/informal arrangements which entity provided to one or more employees
Defined Contribution Plans include fixed payments to separate entities and will have no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay employees
Contribution is fixed and known to the entity.
Multi-employer plans other than state plans pool the assets contributed by various entities that are not under common control and use those assets to provide benefits to employees of more than one entity
Reclassification of Short term benefits may be considered if
characteristics of the benefit change from non-accumulating to accumulating
change in expectation of timing of settlement is temporary
accounting for short term benefit has 2 charactristics
measures on an undiscounted basis
dont involve any actuarial valuation
2 ways to record
as a liabilty in accure cups
as expense if it doesn’t form part of any
Short term paid absences
Accumulating recognized when the employees render services that increase their entitlement to future absences
Non accumulating recognized when the absences occur
Profit Sharing and bonus plans
entity has present legal or constructive obligation to make such payments as result of past events
a reliable estimate of the obligation can be made by the entity
Why treated as expense not distribution of profit?
Because the obligation is from employee service and not from a transaction with the owner